I don't see the point of comparing an OTM put spread to an OTM call spread. They have different strikes and will obviously behave differently. The question at hand is, given a bias on the underlying (bull or bear), is it better to use a debit or credit spread, regardless of whether we are putting on that spread above or below the current price.
Yes you are correct. I should re phrase that i am referring to OTM spreads, in which the debt and credit spreads would have different strike prices. I think it is easier to learn about spreads when you look at them as being OTM. I would recommend that thought process as a beginner. Thanks for catching that.
As we just discussed you can do either and obtain the same trade depending on being ITM or OTM. If we just talk about OTM strikes then purchasing a debit spread gives you more upside with a lower probability. If you have a strong directional bias then an OTM debit spread should be the choice. My bias is neutral almost 100% of the time so I like selling OTM credit spreads. Or ATM credit spreads. I like positive theta with a higher probability but that comes with a lower potential reward.
Let me clarify if you are long then we are comparing a OTM call debit spread to a OTM put credit spread. This is where comparing put spreads and call spreads have a point. Both spreads have a long directional bias so the questions is how do you want to go long?
Thanks for a great response. Poignant questions to work on. I read a book by Cohen titled "options made easy." To be honest, I didn't like it all that much. So I started watching the where do I start series with Tom sosnoff. His daughter is attractive. I think I'll read options as a strategic investment by McMillan next. Thanks for that recommendation. I was mulling over whether to buy it or not because I wasn't sure if I'd get anything out of it, much like Cohen's book.
Would you say it's better to buy/sell two itm strikes on a debit vertical? I was actually thinking about this today. Why buy one itm and the other otm? If I get two strikes that are itm, I have a small cushion in case the trade goes against me. What are the benefits of buYing itm/selling otm vs. Buying itm/selling atm